(CNSNews.com) — Federal Reserve Chairman Ben Bernanke said that the current trajectory of the federal budget – marked by large annual deficits – was “clearly unsustainable” and that “serious economic consequences” could result.

“Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences,” Bernanke told the Senate Budget Committee Tuesday.

“Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy.”

Bernanke said that while nobody knows when a fiscal crisis will come, it is surely “ever closer.”

39 Responses to Bernanke on deficits

Erickson, another video I just watched. Talking about edwin gray, a banking regulator that got fired by congress way back in the 80’s for trying to be honest. He mentions all kind of dirty deals with neil bush, prescott bush jr, etc etc

All the dirty deals that bill black tried to expose. Warren Mosler says our politicians are ignorant or culpable, but he says he will give them the benefit of the doubt and say they are ignorant. Why does he give them that pass? Other people like edwin gray and bill black do not give them that pass.

Here bill black talks about edwin gray in his finest hour. Looking at the video above, it seems nothing has changed in decades, the congress is still being USED AGAINST the people, not the ignorant servant of the people as has been suggested here.

What I really don’t get erickson, is how sad for Bill Black, decades of fighting this evil, and his life thrown away on memories that are so easily forgotten by the masses, while the 2 and 20 people of the world are rolling high! ;) I bet way deep down, black probably thinks hmm, I could be in St Croix with mosler right now drinking fine rum on my big superyacht, instead look where he is, an idol amongst a few academics here and there, not me erickson, the darkside of the force is just too powerful! How much money do you get erickson out of all this time invested?

How a guy like mosler really thinks his academic proposals will gain ANY TRACTION in a system as corrupted and dark that even dark lord sith’s can’t imagine the depths of the evil, makes warren mosler probably look silly to his 2 and 20 peers and congress people who are laughing at him from behind the dark halls.

Im actually quite surprised how well history has been forgotten. 67 years ago Britain’s debt-to-GDP ratio was 250%. Translated into today’s numbers, debts were 3 trillion pounds higher. There were never any problems funding this deficit or questions over Britain’s ability to pay.

So someone should ask mr. Bernanke or mr. Osborne why we should be so worried over deficits now when our grandfathers did not have to.

When I see the proliferation of sites like that, I sometimes think we have no choice but to give them a slack rope and let them hang themselves. Then I realise they will be hanging us all too….Pull on the rope harder boys, don’t give them an inch!

what about the fact that austerity doesn’t work in it’s own terms? Reduce the budget and the deficits only get bigger look at Greece and IMF structurally adjusted countries debts tend to get bigger the more you cut. Bernanke is surely aware of this.

Do any of these idiots bother to see what happens to countries that follow this line?

I think they have the cause/effect backwards. Large deficits scare politicos and their constituents from deficits spending and cutting taxes to provide the spending power needed to grow the economy.

I don’t know Warren if you follow the CEA already, but it might make for interesting chatter and reflection on the President’s underlying economic theory, their analysis, as well as their policy prescriptions.

For example, at the end of April, Krueger and some others gave a lengthy presentation (the video is found easily on their blog page linked above) at the Columbia University School of International and Public Affairs (SIPA). Apparently they were launching a new Center on Economic Governance. Alan’s speech focuses on reversing the middle class jobs deficit. There is a lot of interesting analysis as well as some very good policy proposals. However, absent from Alan’s speech is any mention on how to fund those proposals.

It’s easy to promise government spending, but the money to support these programs has to come from somewhere. As we know, funding this spending can come from reallocation of the existing available dollars, or it can come from recycling currency via taxation and/or borrowing and subsequent spending, or it can come from freshly generated money. Why the Obama administration utterly ignores the question their proposals beg is puzzling. Speculating on why, I suspect the answer lies in the current political environment. The belief is so pervasive our economy is teetering on the brink of collapse from “excess debt,” to reeducate in 90+ days is likely regarded as too risky, and would rather function as inflammatory, gasoline on a burning fire, slit your own wrists type strategy.

Whatever the case is, we need a pro-government spending President after the election. In my estimation, Obama and the Democrats are the best choice here, but promising all these wonderful policies without commenting on funding could back fire. It act to reinforce the opposition’s position by giving the false appearance that the administration has no answer. “See? They can’t answer us. All they do is spend, spend, spend, and they expect you (the taxpayer) to pay for it.”

IMO taxation and borrowing are not the means to funding the deficit, and reallocation, while having its place, isn’t the big picture solution. New money is the antidote. I think people from outside the administration are going to have to persuade the masses of sound theory before it will feel safe enough to explicitly agree.

I would agree borrowing and subsequent spending creates net financial assets within the non-issuer sector(s) as does creating new money, but I wouldn’t regard them as technically the same. For example, one difference worth noting is how borrowing is recorded on the government’s balance sheet versus new money creation. With borrowing, of course the issuer logs a liability. With new money creation, there is no reason to record a liability.

Kelton and others have argued all money is a liability of the Federal government. While this is true, this liability is not the same in kind with how we typically use the word, and hence it acts to equivocate on what’s meant by the term. Owing an entity a financial asset is not the same thing as owing an entity to receive a financial asset back in settlement of a liability.

If I borrow money from you, I owe you money, you owe me to receive my money as payment. But calling what you owe me a liability is a little gratuitous. Those liabilities are not the same in kind. Obviously when I borrow money from you, your liability is not of the sort where you end up owing me money. It’s a different kind of liability, and in effect without drawing this distinction, it muddies the waters.

Federal government money creation is “free and clear money,” meaning when the government creates it, the government does not end up owing any entity any money, only to receive it once its returned in settlement of a liability. New money is free and clear of the sort of liability we are used to referring to with the term. Borrowing isn’t free of this.

the ‘new money’ outstanding is a govt liability, as it’s agreed to accept it for payment of taxes.
nor does the govt ‘owe’ the holders of tsy secs anything other than to debit their securities account at the fed and credit their reserve account at the fed at maturity. both are dollar deposits, and net dollar deposits remain the same.

“If I borrow money from you, I owe you money, you owe me to receive my money as payment. But calling what you owe me a liability is a little gratuitous.”

You are very confused. A dollar is a credit against the US government. It can be used to extinguish a tax liability (anybody’s not just yours), and it can even be used to buy goods and services from the government or to purchase permits, licenses, or leases.

It has nothing to do with a lender/creditor’s obligation to allow the borrower/debtor to pay back his loan.

Imposing a tax liability on US residents (or with Warren’s business card example, imposing a rent on the residents of his house) is distinct from issuing the tax credits (or business cards). There is no symmetry as the two are done separately and in fact involve different people in different ways and to varying degrees. Perhaps more importantly, tax liabilities cannot be imposed on residents arbitrarily (or to an arbitrarily large degree) without pushback. So the total amount of credits against the US government which are outstanding (whether cash dollars, Fed reserves, or Treasury bonds) restricts the fiscal space in which the government has to operate without causing inflation. A dollar is a real liability of the US government, and given our current operational reality, there is no material difference between a dollar and a dollar’s worth of Treasury bonds.

A dollar is a credit against the US government. It can be used to extinguish a tax liability (anybody’s not just yours), and it can even be used to buy goods and services from the government or to purchase permits, licenses, or leases.

I already acknowledged that the Federal government owes the citizenry to honor its promise to receive dollars as settlement of tax liabilities… You’re missing the point.

It has nothing to do with a lender/creditor’s obligation to allow the borrower/debtor to pay back his loan.

Here, let me try and help you follow along.

Whether the liability arose from voluntary citizenship or voluntary borrowing is beside the point. It’s a red herring. The fact is the one entity has one type of liability, the other an entirely different kind. Whether you call the former entity a debtor and the latter a creditor, or a citizen and a government–whether the liability arose from borrowing or taxes–makes no difference to the determination of the truth value of the proposition under evaluation: Are the liabilities the entities owe to each other of the same kind? The answer is quite obvious.

But to spell it out so there isn’t any persisting confusion: The dollar is not the same kind of liability for the Federal government as taxes are for the citizenry, nor is the type of liability a creditor owes a debtor the same as the debtor owes the creditor. My analogy holds for the simple reason that in both cases, a debtor owes financial assets to some entity. One entity owes, for whatever the reason, another some money. The analogy further holds because the lender or Federal government do not owe any entity financial assets, they owe the entity to receive financial assets. Those liabilities are not the same in kind. One is a promise to surrender financial assets, the other to receive financial assets. This isn’t rocket science.

Now everyone knows what a liability is. Some individuals want to broaden the meaning to include virtually any promise. That strikes me as a little gratuitous. When people talk about liabilities, everyone understands that refers to a certain kind of promise–to at some point surrender financial assets to another party–no matter how the liability arose.

In my opinion, outstanding dollars are liabilities of the US government. Just like subway tokens are liabilities of the transit authority, frequent flyer miles are liabilities of an airline, and Warren’s business cards are liabilities of Warren’s (in his example from Soft Currency Economics).

If you insist on calling them something else, or insist that the term liability can only be applied to the situation where one owes the return of a financial asset, then I think that’s unnecessarily cumbersome and inelegant, but that’s your perogative.

What is not a matter of nomenclature, however, is whether an outstanding Treasury bill is different from an outstanding dollar in terms of its effect on inflation and the value of the dollar. It is not, and I’m still not sure whether you agree with and understand that point.

Your value judgment about the “elegance” of the common usage of the term is more amusing than anything. I hate to rain on your parade bud, but it isn’t exactly elegant to equivocate. Broadening the meaning to include the promise to receive money in settlement of a debt is exactly that and only acts to obfuscate MMT’s message. And more to the point, it is entirely unnecessary and without justification.

Look, I’d like to see MMT succeed, but that might depend a smidgen on listening to the occasional criticism, just like good scientists who value honesty and truth instead of cool-aid drinks from the pet cult. People too obstinate to hold their position as falsifiable are a lost cause. Let’s not be those people.

I’m not sure I follow the relevance of short term treasury bonds and their effect on inflation to this particular conversation, but if you’d like to explain where you’re going with that, I’ll listen.

b.
Accounting . liabilities as detailed on a balance sheet, especially in relation to assets and capital.”

Actually, that definition, which is the most narrow given is consistent with my broader definition. Even in part (a), “moneys owed” is part of a list and therefore not inclusive. On top of that, it is somewhat circular to refer to a dictionary which defines money so narrowly. My argument is that money itself is a debt, and that the mainstream (incuding the editors of dictionaries) do not understand that.

“Broadening the meaning to include the promise to receive money in settlement of a debt…”

This is not what I have done. You are still confused. A dollar represents a credit against the US government. It is a liability of the US government by itself. Whether that liability has any value is determined by what you can get for it when you ask for that liability to be settled. You are confusing the liability with part of the institutional structure which imbues it with value.

Likewise, you are also conflating a tax with a debt. A tax imposes an obligation which can turn into a debt, but it is not the same thing as a debt. For example, withholding taxes and sales taxes are paid at the moment a voluntary transaction is consummated. That payment is not the settlement of a debt.

“People too obstinate to hold their position as falsifiable are a lost cause.”

I’ll leave it to the crowd to judge who is being obstinate. In any case, we’re mostly arguing about semantics which is in large part a matter of taste, so it’s not exactly falsifiable. When I first read Innis’ paper, it was a revelation to me, and I found it to be an extremely elegant way of looking at money. Money as debt (i.e. as a liability with a corresponding asset) makes so much more sense than money as a commodity which is an asset without a liability. It allows one to think of every type of IOU as money, and it allows one to better understand the connection between bank money and the government’s fiat money.

“I’m not sure I follow the relevance of short term treasury bonds and their effect on inflation to this particular conversation, but if you’d like to explain where you’re going with that, I’ll listen.”

I already gave you a link to a post which explained why the Treasury can issue T-bills in any amount. For the same reason (Fed repo), one can always sell T-bills, although one can always repo them too obviously. So T-bills can be turned into dollars instantly, with unlimited liquidity, and when they actually mature all you get is dollars, so how can they be different from dollars when it comes to aggregate demand?

I’ve argued for some time that this is actually a key point of MMT that the mainstream (including Krugman) doesn’t understand. As we stand today, the outstanding debt is functionally equivalent to having that many more dollars in the system. There is no overhang problem or “debt” problem. Whatever inflation problem would be caused by having so many dollars outstanding is already being felt.

On top of that, it is somewhat circular to refer to a dictionary which defines money so narrowly. My argument is that money itself is a debt, and that the mainstream (incuding the editors of dictionaries) do not understand that.

I didn’t quote the dictionary as evidence of what the definition of liability ought to be, I quoted it as evidence of how the term is most commonly used. You were accusing me of idiosyncrasy, and I was showing you there is nothing unique about my definition. To the contrary (and ironically), I think it’s perfectly apparent whose usage is out of the ordinary.

In reference to what the definition ought to be, if you’re going to insist on deviating from the common definition, you’ll need justification for doing so. I have yet to see any good reason to broaden the meaning to include virtually any promise. It only acts to muddy the waters and obfuscate the message.

This is not what I have done. You are still confused. A dollar represents a credit against the US government. It is a liability of the US government by itself. Whether that liability has any value is determined by what you can get for it when you ask for that liability to be settled. You are confusing the liability with part of the institutional structure which imbues it with value.

1. You can’t use the term you’re trying to define in the definition ESM, e.g., “It is a *liability* of the US government…” Use a synonym.

2. I’ve already acknowledged multiple times, if we broaden the meaning of the term liability to include the promise to receive dollars in settlement of a debt (and yes, taxes are a debt, we’ll deal with your nonsense momentarily), then in that sense a dollar is a liability of the Federal government. But this kind of liability is quite obviously different in kind than how we normally think of a liability. The promise to receive financial assets is not the same as the promise to forfeit them. Those are fundamentally different promises.

Likewise, you are also conflating a tax with a debt. A tax imposes an obligation which can turn into a debt, but it is not the same thing as a debt. For example, withholding taxes and sales taxes are paid at the moment a voluntary transaction is consummated. That payment is not the settlement of a debt.

Do we really need to argue over how long of a time has to transpire between incurring a debt and its settlement for the debt to be a debt? State sales taxes aren’t paid to the state immediately anyway. They may be paid to the vendor immediately, but the vendor pays them to the state, at least here in Washington state, at the end of the month, or quarterly, or bi-annually, or annually. In effect, the debt shifts from the customer to the vendor which pays the debt on a schedule.

And the Federal government does not receive income tax withholdings immediately, although in this case the debt is settled much more quickly. You have 48 hours.

More to the point: You haven’t defined the alleged difference between taxes and debt, you merely appealed to examples from which apparently I’m supposed to glean the imaginary difference. There is no difference. Owing some entity money is a debt. Whether the owing of financial assets arises from voluntary citizenship, voluntary consumption, or voluntary borrowing is entirely irrelevant, as I already pointed out. The linking pattern is, one entity owes another some money. That’s a debt.

Look, I’ve spent too many years arguing with people who really don’t have any interest in being honest to continue. Their interest is in winning–opportunistic, self-centered, social concerns–not in ascertaining the truth. I don’t find drinking “Cultade” very satisfying, and I don’t find arguing with those who are drunk on the elixir a worthy use of my time. This isn’t science. This is its antithesis. This is dogma, aka unfalsifiably held sacred cows.

No, I was gently accusing you of something else. Hint: It starts with the same four letters.

“1. You can’t use the term you’re trying to define in the definition …”

I wasn’t trying to define it. I was trying to clarify what I was calling a liability. Hint: It was not “the promise to receive dollars in settlement of a debt.”

“Do we really need to argue over how long of a time has to transpire …”

By your reasoning, a purchase of a candy bar involves the settling of a debt.

“You haven’t defined the alleged difference between taxes and debt, you merely appealed to examples from which apparently I’m supposed to glean the imaginary difference.”

I showed by counterexample that not all tax obligations are debts. A wizard in logic like yourself surely understands proof by counterexample.

As for the accounting distinction, I would point to the fact that if and when a debt is incurred, a corresponding asset appears on the creditor’s balance sheet. This happens when the Treasury issues a dollar. It does not happen when the Treasury finds another sucker resident to tax, or raises tax rates.

“The last word is all yours.”

Instead, I’ll give you a last link. Read it, understand it, internalize it. If you do, I promise you’ll find yourself having more reasonable and civil discussions.

Someone will have to do more than just say the government is in deep trouble if our debt goes over this here number. Hey my number is 520% of GDP. I just figured it out. At least until tomorrow. Check back then for an update.

Bernanke synopsis: When people panic they are likely to shut down economically.

This is hardly newsworthy. There can be no underestimating the power human emotions, especially fear and panic, and most especially mass panic. But it is an entirely different matter to describe the power of fear than to clarify a rational basis for such fear, or better yet to explain why it is erroneous.

One would hope that leaders might start to gently explain that the training wheels have been off for decades and that the bicycle hasn’t crashed. It would help, of course, if the prevalent paradigm was accurate enough to assist in that explanation.

“interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy”

The confidence fairy!!!!

Simple solution to fix that: Stop allowing the wrong-minded zeitgeist of insolvency and foreign financed debt to persist and explain in no uncertain terms that we have all the controls and tools we need with our current fiscal and monetary arraignments to create full employment, growth and prosperity. The loss of confidence is predicated upon the belief of false and outdated ideas. Acceptance of reality would dispel any loss of confidence.

@Broll The American, here it says the BIS gives debt ratio levels that must be seriously considered – how much does this influence bernanke and his peers? It seems erickson is right, there are many layers of our financial world: global, supraregional, maultinational, and Bernanke seems to be influenced by forces that are not directly aligned with purely US citizen interests. I thought Congress just told him to just save the USA people? Was schumer telegraphing a larger role for ben?

For government debt, the threshold is around 85% of GDP… When corporate debt goes beyond 90% of GDP, it becomes a drag on growth. And for household debt, we report a threshold around 85% of GDP, although the impact is very imprecisely estimated.”

Why is 85% the “threshold” for govt debt? Japan’s is over 200%. The U.S. & U.K.’s was about the same level just after WWII, and that didn’t cause any problems.

It’s possible that lenders become reluctant to lend to a government at any old level: 20%, 100%, 200%. It depends on numerous factors: the responsibility of the government concerned. The private sector’s desire for financial assets, etc.

Reinhart and Rogoff data on close examination was for fixed fx regimes.

Save America Reply:July 18th, 2012 at 1:08 pm

@Ralph Musgrave, According to the authors, after thresholds are breached, growth can no longer be affected by more debt, and these authors are in CHARGE of the BIS, and a big presence at jackson hole recently. So if Bernanke is getting lots of feedback from these guys, it seems his sounding board is made up of very small brains.

Cecchetti is Economic Adviser at the Bank for Inte rnational Settlements (BIS) and Head of its Monetary and
Economic Department; Mohanty is Head of the Macroeconomic Analysis Unit at the BIS; and Zampolli is
Senior Economist at the BIS. This paper was prepared for the “Achieving Maximum Long-Run Growth”
symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming,
25–27 August 2011.

they’re all proving to be irrelevant;
survival is a function of when our neighbors realize their emperors have no clothes, or relevance either

That’s partly why you hear a lot of politicos in DC talking only about picking up the pieces. Most don’t know how to repair the present system.

Just came from a conf hosted by Mathematica, where career Congressional staff were talking about “THE RELATIONSHIP BETWEEN RESEARCH, POLITICS, AND POLICY”.
It wasn’t worth attending. Basically, bureaucrats telling everyone to work harder at what’s already not working.

Well, there was one interesting comment. The panel all agreed that data and analysis were largely irrelevant, and often negative when influencing policy. I’ll paraphrase their long-winded explanation of why: “Nearly all politicians & staff are only interested in their agenda, and no longer even aware of full situational awareness.”

i.e., most are not interested in the truth, of any kind, only how to whup the political opponent in front of them today

FDR asked him to get the army ready for war. Marshall said he’d take the job only if most of the Sr commanders could be forcibly retired, on the spot. FDR didn’t hesitate & backed Marshall all the way.

That’s the dilemma facing the US electorate today. We can’t meet current challenges with our current Congress. It’s not a problem of data, it’s a problem of initiative and leadership. People get the leadership they deserve.

Reinhart and Rogoff data on close examination was for fixed fx regimes.

There must be more to it. As you have frequently mentioned, US states and other revenue constrained entities that operate as if under a fx regime, cannot even afford such high levels of debt ratios of 85%.

true, but like the euro zone, there have been floating regimes that switched to fixed.
i don’t have a copy of the book handy

Save America Reply:July 20th, 2012 at 3:37 pm

@Ralph Musgrave, The next question is whether we can make adequate adjustments soon enough.

In college we studied the mythical man month, time can’t be replaced with more manpower.

Vegas is hosting Blackhat and Defcon http://www.defcon.org/html/defcon-20/dc-20-schedule.htmlhttp://www.blackhat.com/usa/
You should come. Regarding china, many people and companies I dealt with in DC put chinese and russian cyberwar issues as top priority. Even if only 10 percent of chinese children thrive in the new cyber culture, they will vastly overpower us. Andy Grove did not share your optimism regarding china. Their population and geography may work against them in the physical world, but in the “matrix” they are taking over faster than agent smith! LOL!

SA: “In college we studied the mythical man month, time can’t be replaced with more manpower.”

Exactly. In network or systems design, only a new pattern of connections & message passing through ‘em defines success. The best way to FIND those new patterns in complex systems is to reconnect everything to everything .. and then fall back to the minimal connectivity/exchange needs. In practice, we do that bottom up, by allowing enough income to drive very distributed innovation & option exploring. There’s no other way known.

ps: Per the mythical Chinese man month, population size has never been an impediment to conquest or success. That’s been true from the 2nd species to appear on the planet on to the Hyksos-Egypt, Alexander-Persia, & everyone who’s ever conquered India or China (Ghenghis?). First group to achieve adequate group agility wipes the table, no matter how much debris is in the way.

Plus, it seems China is more worried about their ability to hold on & feed their own population. Hence the attempts to buy Africa. If they were so tough, they would have conquered Russia a long time ago. R/C population differential is even lower than A/C. Ask the Russians if they’ve EVER been scared of China.

Not sure that BIS study is fully in paradigm with MMT… so the underlying premise is off.

Like Ralph pointed out, what mathematic reality is this threshold based on? Japan is 200% and has no problem servicing its debts.

Also the quote, “what its creditors perceive to be its fiscal capacity” harkens back to my original point. Everyone perceives the US to be a currency user… like a member nation of the Eurozone, or with a currency convertible to gold. No idea based upon this premise is relative. The “perceptions” and “confidence” they speak of are all based on myth.

Its as if we all started off playing Football (or what we call Soccer) and then we switched to American Football, but everyone is still concerned about corner kicks and injury time. We should be talking about corner blitzes and off-tackle sweeps.

@Broll The American, What is really scary Broll, is these guys say we need to be well UNDER the posted threshold, so in times of crisis, we can change warren’s temperature gauge and have room to adjust, and it seems bernanke and others are listening to these guys. The USA is close to the threshold, but other nations greatly over it, if world central bankers listen to these guys and adjust accordingly, going well below the threshold levels, MY GOD at the implosion that is going to cause WORLDWIDE, ww3 will certainly arise from the problems this will cause.

Warren wasn’t at jackson hole, so he doesn’t get to influence bernanke like they do. I was just at a money conference in vegas, schiff, forbes, casey, many others were there, no warren, doesn’t seem like a good strategy to me.

It talks about Lawrence King, rising star of the republican party in the 80’s, convicted of a 40 million dollar fraud through franklin financial, also about Former CIA director William Colby, who died under mysterious circumstances. De Camp, a vietnam veteran who worked directly under colby spins a tale about washington scandals and the justice system in oklahoma completely perverted.

The part I think you will like, is about 3/4ths of the way into the video, De Camp metions a judge telling him to read Herman Mellvilles Billy Budd, and then goes on to talk about the whole structure of our state and national governments no longer serving the majority of citizens, that our system must allow for these terrible deeds however – as in billy budd – so that foreign threats can be minimized. De camp, several DC press people, and several legislators in Oklahoma and even CIA director william colby before his death all seem very disenfranchised with our current government. Does the end justify the means?

The first half of the video about the sex scandals and such were not that interesting to me, but what people with power will do when threatened seems very ugly.

Save America Reply:July 20th, 2012 at 11:29 am

@roger erickson, Ok I just watched the video, several points, Warren Mosler must adjust his viewpoint that the players (masters of the universe) are merely out-innovating the government, and the government cannot run as fast in regulating them. (a point you often touch on Erickson, our government needing to adapt and change faster)

It is obviously transparent that government in fact was doing an OK job, but then through regulatory capture, from carter to bush to today, regulatory bodies were intentionally destroyed and nuetered, policy that benefitted the majority of citizens was intentionally reversed, honest people were punished, so I must fully agree with William Black, its not even that our government can’t keep up with the crooks (as warren claims), but the crooks are using the government against the people at this point – anti-regulators indeed!

At the macro scale, my grand father lost all trust in the banking system and friends and society in general after the great depression, this FRAUD is doing the same today, it is causing and will cause more and more people to withdraw from society and lose trust in fellow human beings and all the negative consequences that will bring for us all. This is going in REVERSE to the memes you advocate erickson, people coming together, progressing, adapting and changing faster and faster to bring about a better future.

Some guy just went into a batman movie and blew up a bunch of people, killed 15 I think, if all of them had not trusted in “authority” to protect them and all had thier own gun, would he have been able to kill so many?

Perhaps that is the lesson to take away, greenspan, rubin, and masters of the universe say let the “market” police itself, so I see at the macro level, massive amounts of people no longer trusting government or current markets, or listening to government, or abiding by goverment, we will have numerous breakdowns of organization as people withdraw. Perhaps this will be a good thing, people doing more for themselves and expecting less from the “government”, perhaps we will not survive such a massive “creative destruction” scenario where massive amounts of people withdraw simultaneously and try to form new markets and associations (or dont try and just stagnate).

Relating to the video I posted for you, where de camp talks about the necessary evils we need to accept in order for the USA as an organized body to succeed in global affairs, I used to have long talks with the grandson of eugene chen back in the 80’s, chen was one of the 10 greatest heroes ever in china, couldn’t speak chinese though. He assured me in a few decades china would rule the world, I said sure why not, your government backs your industries, while MSFT is sued by ours. People back then would tell me it was great we had so much infighting in our government and against our companies, we could innovate faster than the rest of world, and I said sure, but chen is right, how do we preserve the things that made america great and spread it to the world if the chinese juggernaut is not checked? labor protections, civil liberties, basic human rights, innovation inducing enviornment, etc

I see our government tried to back the alternative energy/solar panel industry with every trick and crooked deed in the book, but it is not enough, china won and will continue to win, they are more organized it seems to me. Their state controlled industries making our organized companies irrelevant.

So if accepting the evil deeds of our boyz was only to be tolerated on a scenario that the larger governmental system benefitted us against foreign threats (like asia) and they have failed in that regard, then why keep them in power?

As to the electorate waking up! LOL! Warren is just one of a long list of people and bodies that have tried to wake the people in the matrix up, but most are like cypher in the matrix movie, they want to be lied too and believe ignorance is bliss, why upset them? Where does your HOPE and FIGHT come from Erickson? Why hasn’t the world made you more cynical and tired? CIA Director William Colby was going to spend the last years of his life fixing the wrongs he saw too, he had an “accident”! Who today really cares about that?

1) I’ve seen the Franklin Coverup video before (just watched again), & read up a bit on Colby, & acknowledge the comparison to the Billy Budd theme. In systems analysis in general, that topic is referred to as “exception handling.” General way to acknowledge & deal with bugs (exceptions) is to acknowledge up front that exceptions can always occur, and can be handled as such. That caveat allows groups to gracefully deal with exceptions, without fearing that their occurrence irrevocably breaks general rules.

What IGNORANT and/or STUPID people or systems with responsibility will do when threatened can indeed get very ugly – if they’re clumsy at exception handling. The only systemic defense is systemic preparation. Resilient systems (software programming, engineering, DoD officer training, parenting, etc) aspire to that moving target of graceful exception handling, but all have the same problems we do, imposed by politicians, the electorate & context. It’s a competitive environment we’re evolving in. Some processes will be selected, and others eliminated. It’s multi-level adaptation, and not at all simple. Only done by massive trial & error.

2) Re China vs USA gaining dominance. There are 1000 & 1 ways for complex systems to fail. Our system is still far more agile & resilient than theirs. Their main hurdles seem to be homogeneity & split allegiance between old culture/family & new state, and all the corruption & bribery it takes to meld the two. We’re still a country of mostly immigrants, and have lesser but still significant problems. Their Output Gap, corruption, geography and sheer population are all burdens – not net assets. I wouldn’t bet on China until their immigrant population exceeds 50% – & don’t expect that anytime soon, if ever.

3) Why keep incompetent people in power here? Why indeed. Historically, the level of incompetence allowed is a function of comfort, complacency & distractions. There are 1000 & 1 ways to trigger inflection points. No one knows what will trigger change here, or how successful it will be. The USA could, indeed fail, and we will, someday, if we keep pushing limits. It’s simple statistics, like Russian roulette.

4) Where’s our hope? Also a matter of statistics. Simply getting in contact with those who have tried lets one visualize & further tally what’s necessary but not sufficient. Situational awareness requires practice. With enough practice it’s inevitable some of us will see
a: What additional requirement ensure an agile electorate, and
b: HOW to gracefully intervene to enforce those requirements. (DoD says solutions are recognized in the field, and perfected on the training ground.)

It can be done. (I think it’s largely an issue of changing our early education standards, e.g., focusing on situational awareness, & organizational practice, not just basic skills. Instilling more appreciation for systems & dynamic value, not just static asset value.) The next question is whether we can make adequate adjustments soon enough.

Unfortunately, there’s no way to answer that last question. We’ll find out, soon enough.